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Kenya’s Highest Dividend Paying Stocks [2020]

By
Irene Makanga
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0
wealth architects - kenyas highest dividend paying stocks 2020

As the pandemic continues to rage on, some calm has settled on the stock market. Over the last couple of months, several Kenyan companies paid dividends to their shareholders. While most companies are laying off workers, some firms in Kenya have been able to reward shareholders and maintain dividends at the same level during this pandemic. 

While being mindful of the optics of paying dividends during this crisis, for most companies its business as usual and most of these dividends go to higher-income Kenyans and foreign investors. Therefore, moving forward if you’ve never considered investing in dividend-paying stocks, it’s never too late to get started.  

The Dividend Yield

In order to get the stocks that offer the highest dividend, ergo the highest return on dividend, we calculate the dividend yield.

Calculating the dividend yield is beneficial for the following reasons:

  • Calculating the dividend yield is quite easy. We just divide the annual dividend payments by the stock price and convert into a percentage.
  • It makes it easier to compare and select stocks based on how much dividend return realized based each per shilling invested. The absolute dividend amount per share is a helpful measure because companies vary widely across.
  • Increasing dividend yield points to the financial health of the company that chooses to pay dividends. When a company chooses to raise its dividend, communicates to its investors that it’s doing well since it can afford to pau out more of its profits to shareholders.

Learn more: Kenya’s Highest Dividend Paying Stocks

2020 Dividend Paying Stocks

Here is a summary of the dividend-paying stocks of the Nairobi Stock Exchange (NSE) by sector:

Stock SectorStock PriceFinal DividendDividend Yeild
KakuziAgricultureKsh 370Ksh 143.78%
Limuru TeaAgricultureKsh 400Ksh 0.700.175%
Absa Bank Kenya PlcBankingKsh 9.42Ksh 0.909.57%
Cooperative Bank of Kenya LtdBankingKsh 11.35Ksh 1.008.81%
Diamond Trust BankBankingKsh 63Ksh 2.704.29%
Equity Group HoldingsBankingKsh 34Ksh 2.507.35%
I&M Holdings LtdBankingKsh 44Ksh 2.555.6%
Stanbic Holding PlcBankingKsh 80Ksh 5.807.25%
Standard Chartered Bank LtdBankingKsh 159.25Ksh 159.42%
Scangroup LtdCommerical & ServicesKsh 6.70Ksh 8.00119.4%
KenGen LtdEnergy & PetroleumKsh 5.08Ksh 0.254.92%
Total Kenta LtdEnergy & PetroleumKsh 24.05Ksh 1.305.41%
Umeme LtdEnergy & PetroleumKsh 7.20Ksh 41.30573.61%
Jubilee Holdings LtdInsuranceKsh 270Ksh 8.002.96%
Kenya Re-Insurance Corporation LtdInsuranceKsh 2.27Ksh 0.104.41%
Britam Holdings LtdInsuranceKsh 7.76Ksh 0.253.22%
Nairobi Stock ExchangeInvestment ServicesKsh 8.02Ksh 0.809.98%
British American Tobacco (BAT)Manufacturing & AlliedKsh 342Ksh 308.77%
Fahari I-Reit Real Estate Investment Trust (REIT)Ksh 5.50Ksh 0.7513.64%
Safaricom PlcTelecommunications & TechnologyKsh 30.50Ksh 1.404.59%

See also: Is the Stanlib Fahari I-REIT a good investment?

Highest Dividend Paying Stocks

Here is a list of the highest dividend yields of 2020 and a previous year comparison. The safe withdrawal rate for any investment is 4%, thus our lower our cut-off is 4%. Anything above 10% tends to be risky. Therefore, we shall only consider dividend yields that are above 4% but below 10%.

Stock2020 Yield2019 Yield2018 Yield2017 Yield
Absa Bank Kenya Plc (ABSA)9.57%6.74%––
British American Tobacco (BAT)8.77%5.7%2.80%–
Cooperative Bank of Kenya Ltd(COOP)8.81%6.12%4.08%–
Diamond Trust Bank Kenya Ltd (DTK)4.29%2.39%1.21%–
Equity Group Holdings (EQTY)7.35%4.67%3.70%–
I&M Holdings Ltd (IMH)5.6%4.72%2.80%–
KenGen Ltd (KEGN)4.92%4.37%––
Kenya Re-Insurance Cooperation Ltd (KNRE)4.41%13.64%4.91%–
Safaricom Plc (SCOM)4.59%1.97%–3.10%
Stanbic Holding Plc (SBIC)7.25%6.45%––
Standard Chartered Bank Ltd (SCBK)9.42%6.91%5.48%–
Total Kenya Ltd (TOTL)5.41%4.73%3.97%–

Learn more: Kenya’s Highest Dividend Paying Stocks

Special Considerations

  • Dividend investing in the time of COVID-19 needs serious consideration. The current economic climate, company history and performance needs to be considered before committing to any investment decision.
  • Mature companies that are settled in their industries tend to regularly pay dividends and offer better dividend yields. Younger or faster-growing companies like Safaricom tend to reinvest their profits for growth instead of paying out dividends.
  • There are dangers to high dividend yields. Anything above 10% dividend yield could be a red flag. Common reasons for a high dividend yield are a dramatic decline in stock price or the company is attempting to attract investors with better returns.
  • Note that a dividend yield doesn’t provide the full picture of the company. Therefore, take the time to consider stocks payout ratio, dividend history and performance before making any investment decision.

Looking Beyond

With the numbers in mind and the special considerations listed above, it would make more sense to look for companies with a lower and more consistent dividend yield. Look for solid financials and dividend pay rates similar to industry peers.

It is also important to remember that dividend yields do not account for potential changes in future dividend payouts or price fluctuations. During this time of the pandemic, take the time to learn how companies are coping and what changes they are making that might affect their bottom line.

As we hope for this crisis to come to an end, let’s look beyond and make the right moves today. A good number of the stocks mentioned here are seriously undervalued. If you do not already own them, consider investing. Undervalued stocks that pay dividends are always great investments.

Happy Investing!

Image credits: Top by Olya Kobruseva from Pexels

Article Sources:

1. My Stocks. “Corporate Announcements, https://live.mystocks.co.ke/m/calendar.” Accessed on 01st November 2020.

2. Wealth Architects. “Kenya’s Highest Dividend Paying Stocks, https://wealtharchitects.co.ke/blog/2018/04/05/kenyas-highest-dividend-paying-stocks/.”Accessed on 30th November 2020.

3. My Stocks. Price list anad trading summary for Thursday 29st December, 2019, https://live.mystocks.co.ke/price_list/20201029.” Accessed on 30st October, 2020.

4. My Stocks. Price list anad trading summary for Tuesday 31st December, 2019, https://live.mystocks.co.ke/price_list/20191231.” Accessed on 01st November 2020.

Disclaimer: This information is provided to you as a resource for informational purposes only.

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The Top Venture Capitalists in Kenya

By
Irene Makanga
-
0
Wealth Architects - How to Get Venture Capital Funding In Kenya

Venture Capitalists are professional money managers.

If you are an emerging company with high growth potential and you are finding it hard to secure standard business credit, then venture capital financing may be just for you. Venture capital is the most sought after financing method by most entrepreneurs. It provides the much-needed capital injection to move the business to the next level. However, the main risk of venture capital is the loss of control over the business. 

Before seeking out venture capitalists to invest, consider all the upsides and downsides of venture capital. Meanwhile, here are the top (in no particular order) venture capitalists (partners and firms) in Kenya:

Venture Capitalists (Partners & Firms)

1. Novastar Ventures Ltd.

Novastar Ventures is both private equity and venture capitalist firm with presence in Nairobi, Kenya and Lagos, Nigeria. They specialize in early-stage investments, particularly BoP markets, typically in East & West Africa, Asia, Europe and the United States. Their primary areas of investment are education, healthcare, agri-business, food and water sectors. Their cash injections run between $0.25million and $8million. 

Investor Type: Venture Capital

Investment Stage: Early Stage

Portfolio: Bridge International Academies, GreenPath, Hivisasa, iProcure, Komaza, M-Farm, Moko Funiture, and more.

2. TLcom Capital

TLcom Capital is a global venture capitalist that has been investing in Southern Africa, Europe, USA and Isreal since its inception in 1999. They seek to invest between $ 0.5M to 10M in fast-growth tech-enabled business that seeks to solve the complex issues that our continent is facing. Therefore, their investments cut across commercial services, communications and networking and software industry. So far, they have successfully exited 18 African investments through acquisition by strategic buyers and private equity funding.

Investor Type: Venture Capital

Investment Type: Early to Growth Stage

Portfolio: Twiga Foods, Andela and more.

3. Fanisi Capital Ltd

Fanisi Capital is a venture capital and private equity firm that is part of Amani Capital. Founded in 2009, they invest $0.5million to $3 million in companies with a turnover of about $1million to $8million. Their region of focus is East Africa, with a more specific focus in Kenya, Rwanda, Uganda and Tanzania. Their mode of investing is to take a minority or majority stake in the form of straight equity, usually preferred equity or quasi-equity and convertible debt. 

Fanisi Capital specializes in early-stage start-ups, expansion/growth and buyout/acquisition capital. They like to invest in small and medium-sized enterprises cutting across the board industries.  The industries include technology, agri-business, retail, financial services, real estate, energy, natural resources, manufacturing, media, education, healthcare, tourism, transport and logistics – just to name a few.

Investor Type: Venture Capital & Private Equity

Investment Stage: Early Stage, Expansion/Growth and Buyout/Acquisition

Portfolio: Hillcrest International Schools, Sophar Limited, Haltons Limited, Live Ad Limited and more.

4. Safaricom’s Spark Fund

The Safaricom Spark Fund is a venture capital fund that invests in late seed to early growth start start-ups that use mobile technology as an enabler. Therefore, their main aim is to support the development and growth of high potential mobile tech start-ups. The fund seeks to provide support through a combination of capital investment, business development support, technical assistance by leveraging on Safaricom’s unique capabilities, assets and market positioning.

The fund size is about USD1M, providing minority equity stake or convertible debt to selected start-up for about Ksh 6M to Ksh 22M in capital infusion.

Investor Type: Venture Capital

Investment Stage: Start-up

Portfolio: Sendy, Lynk, Ajua, Eneza, iProcure and Farm drive.

5. Savannah Fund

The Savannah Fund is a seed fund that specializes in early-stage high growth technology start-ups in the Sub-Saharan region of Africa. They invest about $50,000 – $1,000,000 in early-stage high growth potential tech-firms that are web-based or mobile-based. 

Alongside the capital infusion, they also provide mentor networks both in the region and from Silicon Valley through their accelerator program and a follow-on independent seed fund. 

Investor Type: Micro venture Capital

Investment Stage: Early Stage, Seed Capital

Portfolio: Moringa School, Copia, Eneza, Sendy and more.

6. Adullam Ventures

Adullam Ventures is a Kitale based venture capital firm that seeks to invest in youth-led start-ups. Therefore, Adullam Ventures mainly invests in small businesses targeting the youth in need of capital – for starting or growing their businesses. In addition to providing funding, they also assist businesses with professional services and technical assistance.

Investor Type: Venture Capital

Investment Type: Early Stage

Portfolio: Letta Snacks

7. Viktoria Ventures

Viktoria Ventures seeks to connect start-ups and angel investors and support the growth of entrepreneurs in various sectors of East Africa. They invest in firms that are post-prototype and post-first revenue, with a founding team with sector expertise as well as technical and business know-how. 

Viktoria Ventures provides support in the following ways:

  • Advisory. Provide advice to investors and provide portfolio management support.  
  • Connection. Create linkages to successful start-up ecosystem in other countries. 
  • Research. Conduct research and facilitate planning for development organizations that seek to catapult growth. 
  • Start-up Programs. Develop, provide resources and manage for incubation and acceleration programs. 

Investor Type: Angel Capital

Investment Stage: Early Stage

Portfolio: ManPro Sytems, Mesozi

8. Africa Tech Ventures

Africa Tech Ventures is a Kenyan based venture capitalist with vast experience in investing in early-stage tech-enabled businesses. They particularly focus on companies that increase access to essential goods and services or provide solutions that increase access to markets and financial services. Therefore, they invest between $0.1M to $5M in exchange for a minority stake in the company. This equity capital comes with hands-on support to foster growth and scalability of the business.

Investor Type: Venture Capital

Investment Type: Early Stage

Portfolio: Cellulant, FarmDrive, mSurvey, Pezesha and more.

9. Afza Capital

Afza Capital is a Nairobi based venture capital firm that was founded in 2020 with the aim of investing in Medtech, fintech, agriculture and education. They seek to invest in early-stage companies that have a social impact.

Investor Type: Venture Capital

Investment Type: Early Stage

Portfolio: Popote Pay, Daktari Africa

10. East Africa Capital Partners

East African Capital Partners is an investment advisory and business facilitation firm with particular expertise within East Africa. They seek to invest in start-ups in the technology, media, telecommunications and network industries.

Investor Type: Venture Capital

Investment Type: Early Stage

Portfolio: Wananchi Group

Other Notable Venture Capitalists

  • Afvest Limited is a venture capital fund that offers an investment ticket size of Ksh 50M to 100M.
  • Enza Capital makes seed investments of up to $1M in start-ups in the information technology sector. They also offer entrepreneurial guidance and operational expertise to drive growth in funded start-ups.
  • FSD Africa is aided by the UK Government with the aim to reduce poverty across Sub Saharan Africa. Their main focus is the financial sector, providing early-stage, risk-bearing capital. Their aim is to help building efficient and inclusive financial markets.
  • Kenya  Feed the Innovation Engine (KFIE) is an impact investment organization. They seek to foster innovation in solving problems such as food security, undernutrition and poverty.
  • Kuria Capital is another venture capital fund that seeks to provide seed capital and business incubation for start-ups. They seek minority equity positions with the goal of end-term divesture or retention of strong value gainers.  
  • Investeq Capital is an impact investor with the aim of developing financial services in Africa. They offer private equity and venture capital for startups, along with advisory services to improve the financial capacity of the company.
  • Saviu Ventures is a venture capitalist that invests in seed-stage, early-stage and later-stage companies. It seeks to invest in category-defining tech companies in commercial products, commercial services, retail, e-commerce, fintech and mobility sectors.
  • SUNU Capital is an early-stage venture capital firm. It exclusively invests in Agriculture, consumer non-durables, logistics, pharmaceuticals, retail, software, and transportation sector.
  • TBL Mirro Funds is a private equity and buyout firm with a focus in commercial services, healthcare services, IT services and software sector.
  • White Rhino Capital is a venture capitalist with a primary focus on commercial services, financial services and software sector.
  • 88Mph is a seed fund and accelerator that seeks to provide resources to accelerate the group of startups. Notable start-ups that were under 88mph are Mdundo, Yum, Ghafla and more.

Learn more: Venture Capital: Everything You Need to Know

Summary

Since Kenya has one of the best start-up ecosystems, a lot of venture capitalists have established a base here. They are always searching for the next big investment opportunities. So, before you jump into any relationship, take the time to reflect on what your business really needs and where you want to be. Understand that any potential venture capitalist will have a certain level of expectation of their relationship with you. They might want to be ‘hands-on’, or ‘hands-off’.

Also, take into consideration your core goals and values, and whether you are willing to compromise on any of them if it means growth for the business. Also, weigh your other needs in terms of additional expertise, connections and resources that you might get once you enter into this relationship. Does it outweigh the risk of losing ownership and control?

Image credits: Top by Brian Ngali from Pexels

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Venture Capital: Everything You Need to Know

By
Irene Makanga
-
0
Entrepreneurship - Wealth Architects - Venture Capital

What Is Venture Capital?

Venture Capital (VC) is a private form of financing provided by investors to small businesses or startups for the development of the business with outstanding growth potential. The capital invested is from venture capital funds, well-off individual, investment banks and other financial institutions. 

Venture Capitals, do not only provide money. They also provide their management expertise and technical support necessary to scale. However, it is important to note that the goal of a Venture Capital is to make a good return for invested funds. Though risky – with a nine out of 10 fail rate – the potential for above-average profit is an attractive payoff to investors. 

For this reason, Venture Capitals seek to invest only in businesses or startups that have the potential to generate 10x type of return. This enables them to even out the losses of other companies they may have within their investment portfolio.

How Does Venture Capital Work?

There are two key things you need to understand about Venture Capital Funds: general and limited partners. General partners are in charge of making investment decisions such as finding startups to invest in. While the limited partners provide the funds necessary to complete those investments. 

It is important to note that Venture Capital funds don’t invest the money of their partners, and if they do, it accounts for less than 1% of the size of the fund. Hence, all the money invested originates from limited partners such as one-percenters, pension funds, hedge funds and more. 

How Do Venture Capital Firms Make Money?

Venture Capital funds make their money in two ways: management fees and carried interest. 

Management fees can be defined as the cost associated with having your assets professionally managed. Which is the amount of capital that is under management. Venture Capital Funds typically charge an annual management fee to fund’s management company, as a form of salary. The fee is used to cover expenses and fund expenses. Management fees are usually calculated on a percentage of capital commitments to the fund, typically 2 % to 2.5%. 

On the other hand is carried interest, which is basically a share of the profit of an investment or investment fund that is paid to the investment manager over the amount that the manager contributed to the partnership. Normally, carried interest in Venture Capital is about 20% to 25%, whereby 20% of the profit goes to the general partners and 80% belongs to the limited partners. 

How Does This Influence Start-Ups?

Any investor will back a start-up with only one goal in mind which is to generate a return on investment. In short, they are in for the money – about 99% of the time. Hence, it is worthwhile to note that how VC firms influence start-ups. 

Venture Capital funds tend to have a fixed investment life of about 10 years. Hence, VCs like to establish shorter investment cycles in which they can sell their position within this time before they run out of money or energy. If a company fails to provide an exit, the VC firm will move in to work alongside the founders to scale and seek an exit, providing the returns they initially sought. 

See also: 4 Ways Financial Planning Differs for Entrepreneurs

What Are the Different Types of Venture Capital?

There are six types of venture capital based on the stage of the business. However, there are only three principal types of venture capital: early stage, expansion and acquisition or buyout financing. 

Early Stage Financing

Early State financing is done by angel investors, often a wealthy individual with technical knowledge can make a small investment at a very early stage of a company’s development. The early-stage financing can be divided into three main subdivisions: seed financing, start-up financing and first stage financing. 

  • Seed-stage financing. This takes the form of financing of projects within their initial phase. It seeks to cover the expenses of the new venture including expenses for research and development of the project idea.
  • Start-up financing. Finances projects that are in the phase of testing and finalising the production prototype. At this stage, the project may only have one principal working full-time and is in the process of getting other team members.
  • First-stage financing. At this stage, the project is fully launched and the company may be about 2-3 years old at this point. The funding acquired goes towards boosting sales, increasing productivity and building corporate infrastructure and distribution systems.

Expansion Financing

Most Venture Capital funds, invest at this stage to maximize return on investment. The financing takes the form of second-stage financing and bridge financing (also known as third-stage or mezzanine financing).

  • Second-stage financing. The company is seeking to expand in all its forms. Sales at this stage of the company are snowballing. Thus the company is looking to increase the marketing budget to enter new markets.
  • Bridge or Mezzanine financing. The financing at this stage is used to prepare a company for an Initial Public Offering (IPO). The company has proven itself as a viable business and is ready to move to the next stage. This form of financing is usually short-term and is typically paid back from the proceeds of the IPO.

Acquisition/Buyout Financing

A strategic form of venture capital financing that seeks to fund a company to acquire or buy out a competitor or a strategic business whose success may drive revenue growth for the company and Venture Capital. 

Advantages & Disadvantages of Venture Capital Funding

There are several advantages and disadvantages of using venture capital to finance your business or start-up that you need to note.

Advantages 

a. Business Expertise. Venture capital funds also provide young businesses with a valuable source of guidance and business expertise to push them to the next level. They can be a great source of help when making business decisions. Particularly in key areas of growth such as financial and human resource management.

b. Access to More Resources. Venture capital firms can provide active support and resources that are key for your particular stage in the growth of your young company. They can provide active support and resources for legal, tax, personnel matters and more.

c. Networking & Connections. Typically, venture capital firms are very well connected in the business community. Therefore, as part of the firm, you can tap into those connections and benefit tremendously.

Disadvantages

a. Loss of Control. Along with the capital injection, venture capital firms seek to get involved in your business. The size of their stake will determine how much say they may have to shape the future of the company.

b. Minority Ownership Status. Depending on the stake the venture capital firm is seeking to have, you end up with a minority stake. As a result, you lose management control of your company.

Learn More: 8 Personal Finance Tips for Start-up Entrepreneurs

In a SnapShot

Venture capital funds inject funds into new high-risk and profitable businesses intending to make 10x profit for their investors. This makes venture capitals a fundamental force that drives innovation as the majority of the start-ups that are recipients of the fund are into software, telecommunication, biotech, renewable energy and internet. 

Image Credits: Top by The Lazy Artist Gallery from Pexels

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5 of the Best Loan Apps in Kenya for Instant Loans

By
Irene Makanga
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0

There are so many loan apps in Kenya that now offer a myriad of service options. They mainly offer the promise of fast loan solutions with no collateral. Their convenience has lured many into a vicious cycle of debt. Some of them have been known to issue threats and blackist borrowers. So don’t fall for their sweet offerings and encouraging words.

However, should you find yourself in a sticky situation where you need to urgently borrow money or you want to build yourself, here is a list of your top 5 best loan apps in Kenya. This list was complied based on reliablity of the company and their business practices.

1. Safaricom and CBA’s M-Shwari

M-Shwari is a mobile based bank account that offers both savings and loans. Over the years, it has become of the best and most convenient loan apps on the market. You can borrow as little as Ksh 100 at an attractive rate of 7.5% and payback within 30 days. The loan disbursement is done through M-Pesa and is processed within a few minutes.

To qualify for M-Shwari loans, you will have to be an active user of Safaricom and M-Pesa services for at least six months, and save religiously in your M-Shwari account.

Late repayment do not disturb your relationship with Safaricom. The loan is simply renewed if not repaid after 31 days and will be reported after 120 days, if not paid, to the Credit Reference Bureau (CRB) as required by law.

Why it’s great?

M-Shwari is super convenient and great for taking out loans during emergencies. It also comes with a savings option that earns you interest and has a deposit insurance.

Learn more: How to Get Out Of Debt Successfully

2. M-Pesa’s Fuliza

M-Pesa’s Fuliza is an overdraft service that allows you to complete M-Pesa transactions when you don’t have sufficient funds. This service allows you to transact up to Ksh 70,000 at a one-off interest rate of 1.083%. You will also be charged a daily administrative fee on the outstanding balance at a predetermined specified rate depending on your balance.

To qualify, you simply have to have an active Safaricom line and be subscribed to Fuiliza M-Pesa service to opt into the service.

Late repayment typically results in your access to Fuliza M-Pesa feature being revoked for unpaid balances after 30 days. Your services, however, will be fully restored once payment is made in full.

Why it’s great? 

Easy access to short-term credit when you most need it.

3. Tala

Tala is another quite popular loan app that allows you to take out instant loans at a flat fee rate. They offer two options, a 21-day loan and a 30-day loan. For the 21-day loan, they charge a service fee of 5%-14%. While as for the 30-day loan, a service fee of 7-19% is applied. On this app you can borrow for loans from Ksh 1,000 to 5,000. This loan limited can be extended as you payback the loan to Ksh 30,000.

Why it’s great?

Tala offers is easy to access and rewards you with lower fees if you payback on time.

Learn more: 5 Effective Ways to Get Out of Debt Quickly

4. Branch

Branch is a bonafide loan app that takes into consideration the borrowers individual repayment history, similar to what banks do, in determining the interest rate to offer. They offer loans of Ksh 250 – 70,000, for a duration of 4-48 weeks. Their interest rates may vary from person to person and the loan option chosen but typically range from 13-29% with an equivalenet of 2-16% and an APR of 22%-199%. Late repayment of loans, will result you in being reported to the Credit Reference Bureau (CRB) and subsequently blacklisted.

To qualify, you simple download their app from google play store and fill in a short application.

Why it’s great?

Branch doesn’t apply late fees for their instant loans, or rollover fees. They offer higher loan limits and you don’t need any collateral to get a loan or savings with them.

See also: How To Build A Good Credit Score

5. Zenka

Zenka is another great flexible loan app. They promise to offer loans in just 5 minutes of applying. Zenka offers loans of Ksh 500 up to 30, 000 – loan limits are extended by making loan repayments on time. They offer extended loan payment periods of 61 days with a one-time processing fee of 9-29% on the principal amount. The effective annual APR is 70.7 – 224.89%.

For late replayments, Zenka applies a late repayment penalty if the loan isn’t paid by the due date. They will also report you to the Credit Reference Bureau (CRB) as required by law.

To qualify, you simply have to download their app and register.

Why it’s great?

Zenka offers extended loan periods, unlike other loan apps.

Summary

Before engaging in the services of the above loan platforms, it is in your best interest to read the terms and conditions, and privacy policy very carefully. If you agree, only then should you proceed to use their services. Note that most loan apps will require you to share your personal information and have access to the data on your phone. Ensure that your privacy is protected and that they will use your information for good. Above all else, protect yourself from unscrupulous lenders.

Also, ensure that you have solid financial plan that establishes a viable debt solution for your financial problems. Don’t just fall for anything.

Happy Building!

Image credits: Top by cottonbro from Pexels

 

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How to Make Money From Treasury Bills

By
Irene Makanga
-
0

Treasury bills or ‘T-Bills’ rates are quite attractive in Kenya, making them quite popular among investors seeking a safety net. They are accessible to anyone – individuals and corporations. They are quite easy to invest in and are low-risk as they are backed by the government. Treasury bills are securities issued by the Government of Kenya. Which means that when you purchase a treasury bill, you are lending the government money to run its budget.

Understanding Treasury Bills

To understand Treasury Bills, we will take a look at a 91 day previously issued Treasury Bill that was on offer on the Central Bank of Kenya (CBK) website. The details were as follows:

91-DAY

Issue Number: 2390/91

Auction Date: 15th October 2020

Average Interest Rate of Accepted Bids: 6.468%

Price per KSH 100 at the average interest rate: 98.413

Value Dated: 12th October 2020

Due Date: 11th January 2021

A Treasury bill has a face value of a certain amount, which is its actual worth. It is sold for less – in this case, the price of this 91-day bill quoted above is 98.413. This is the price you as an investor will buy it for. Every Treasury Bill has a specified maturity date, in this case, its the due date – the date upon which you’ll receive your money back. On this date, the government will pay you the full price of the bill – KSH 100 – and you earn 1.587, for every KSH 100 you invest. This amount that you earn is what we consider as interest rate or your payment for the loan of your money to the government.

The difference between the value of the bill and the amount of money you pay for it is called the discount rate, and it is set as a percentage. In the offer above, the discount rate is 1.587%, because KSH 1.587 is 1.587% of KSH 100.

How Treasury Bills Make Money For You

All treasury bills are short-term investment instruments and tend to mature within a year from the date of issue. The Government of Kenya issues 91-day, 182-day and 364-day Treasury bills. Therefore, as an investor, you have the option to chose your maturity periods. The longer the period, the more money you will earn from your investment.

In Kenya, the minimum amount you can buy a bill for is KSH 100,000. T-bills are sold in increments of KSH 50,000. Their purpose is to help the Kenyan Government finance the national debt. It is therefore a way for the government to make money from the public.

Here is a rough estimate of the money to be made from the offer above will be:

For an investment whose face value is KSH 100,000, invested at a rate of 6.468% for 91 days, will yield an interest of 1,348.95 at the end of the period. The investor’s initial investment will be KSH. 98,651.05. At the end of the period, the investor will receive 100,000. This amount includes an interest income of 1348.95.

Therefore, the total amount earned on this investment is KSH 1,348.95 at the end of the 91 day period. This gives an annual yield of 5.4%.

Things to consider

There are several things you need to consider before investing in treasury bills.

They include:

1. The Pros & Cons of T-Bills

The reason why treasury bills are so popular among investors is not only because they low-risk, but also because they are non-technical and very reliable forms of investment. Here are some pros and cons of investing in T-Bills.

Pros

a. High credit quality. Treasury bills are government-backed securities and therefore have a high credit quality.

b. Fast Returns. Treasury bill returns are realized within a year of investing.

c. High Liquidity. Treasury bills are a quite safe and highly liquid investment.

Cons

a. Low Returns. Treasury bills provide smaller returns than other forms of investment. This is because they are low-risk.

2. Balancing Risk & Opportunity Cost

T-Bills are not the best form of investment for all situations or individuals. The opportunity cost of investing in treasury bills is demonstrated in the unrealized gains that might be had elsewhere in the market. Therefore, when investing in treasury bills, one needs to balance the risk and opportunity cost to be realized.

For individuals aiming for a conservative approach to their investments in order to protect or preserve their nest egg against inflation and other factors, then treasury bills make a great place to park your money. On the other hand, for individuals seeking to accumulate wealth and save for retirement, they need to take on more risk and therefore, should take advantage of the opportunity cost of investing in stocks, bonds and other securities.

How to Buy Treasury Bills

You can easily purchase treasury bills at Central Bank of Kenya or at your local bank through a broker/dealer. The bills are issued through an auction bidding process, which occurs on a weekly basis.

Before you purchase a treasury bill, you’ll have to decide whether to make a competitive or non-competitive bid offer.

Non-competitive bidding is the simplest way to purchase treasury bills and is what most investors who are not experts in security trading do. When you make a non-competitive bid, you agree to accept whatever interest rate is decided upon at the auction. This way, you can guarantee that your bid is accepted and that you will get the full amount of your bull paid back to you. Therefore, the exact interest rate you will receive is announced when the auction closes – in the above offer it was the average interest rate of the accepted bids.

On the other hand, in the competitive bidding process, you can specify the return you want to receive. This kind of bidding is done by corporations or individuals who really understand the dynamics of supply and demand of the securities market.  Therefore, it is more complicated as you don’t know if your bid is accepted or not – as if the rate you offer is lower or equal to the rate set at action your bid will be accepted, and you’ll receive the uniform rate i.e. the highest accepted yield. All accepted bidders receive this rate even though they bid for less.

The auction process begins when the Central Bank of Kenya announces the treasury bill auction. At this point, the CBK will start accepting bids, which can be submitted at the CBK until the auction closing time.

Learn more: How to Invest in Treasury Bills in Kenya

The Bottomline

In the end, many investors find treasury bills’ safety net quite attractive and worth it. However, if you are looking for higher yield returns, consider looking elsewhere.

Happy Investing!

Image credits: Top by Pixabay via Pexels.

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Why You Should Budget Weekly For Growth

By
Irene Makanga
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0
wealth architects - How to Budget the Smart Way and Track Spending

Sometimes we get lost looking at the big picture budget, while all the details that pull it all together fall by the wayside. Budgeting weekly will help you gain greater control of your money – How much you have available in a week is more manageable than a month. A month is a very long time to keep your finances in check as life sometimes gets in the way and we forget to balance things out. A week is a better time span to manage transactions and maintain a clear picture. It is easier to see the previous weeks expenses and track your progress from week to week.

So here is why and how you should put together your weekly budget. 

Why A Weekly Budget

I have been using a weekly budget for about a year now, these are the the benefits I realised: 

1. I can better anticipate, account and examine my weekly expenses. Particularly, my discretionary spending, that occurs more frequently, was more in control. I was also found that I was more prepared for the mandatory end month expenses such as bills, utilities and rent.

2. I started thinking about my income in weekly terms as I was trying to balance out my expenses. This has pushed me to think bigger and how much I earn has increased per week.


3. The shorter planning time has resulted in fewer transactions per week and opportunities to adjust my budget if need be. This has made it easier to manage my expenses as weeks can easily be compared to units of time. 

How to Create and Utilize A Weekly Budget

If you find that you cannot keep up with your monthly budget and need help to gain better control of your spending, they try a weekly budget. Here is how to go about it: 

Note Your Weekly Spend

Find out how much you spend on a weekly basis and then place that as a spending ceiling cap. How much you spend per month, divide by how many days there are in a month and then multiply by seven to find your weekly spend. 

Note that weekly budgeting focuses on discretionary expenses only. These include the following:  

Non-Discretionary (Mandatory)

Mortgage/RentUtilities – Water,
Electricity
Insurance Premiums
Telephone/Mobile Phone Bill
Monthly subscriptions – Newspaper, TV & Other streaming services, InternetGym/Yoga Membership
Auto insurance premiums (yearly)
School Fees

Discretionary Expenses (Contingent on lifestyle)

Car Fuel
Public Transport Fare
Food (eating out, drinks, groceries)
Personal Spending
Household Spending
Clothes
Entertainment

Learn More: How To Make A Budget

Schedule Bills & Divvy Your Income

Once you know exactly what your expenses are, create a schedule for when the bills are due e.g. your rent is due on the 30th of each month or your water bill should be paid by the 5th of each month.  Mark The exact date for the bull and ensure that you pay when the time comes. This way, you won’t miss the bigger things while you budget the smaller items on a weekly basis. 

After you map out your bills, share out your income accordingly. This won’t be perfect but you will have a better idea just how much you are spending on recurring, fixed expenses each week of the month. 

Learn More: 5 Amazing Personal Finance Apps that Make Life Easy

Taking Note of Your Actual Expenses

Take note of all your expenses – save receipts and study bank statements. Also, note your patterns of expenditure and then aggregate your actual expenses.  Compare them with what you earn weekly (earning per month divided by the number of days, multiply by seven).

Reflect

Take note on what was done, how much was saved/invested and what was not in terms of spend.  Reflect for improvement. 

Learn More: 6 Keys to Successfully Manage Your Personal Finance

Summary

The idea is to create a system that serves your goal. Without systems, goal fulfilment becomes very difficult. Over time, you will work your way to a comfortable budget that allows you to live well and not compromise achieving your goals. 

Generally, it is difficult to budget your money. However,  breaking down your large monthly/yearly budget into a weekly budget can reveal how much you spend in any given week and make managing money very easy. Ultimately, you will find that it is easier to live within your means, paying off your debts, and saving for the future. 

So, if your monthly budget isn’t working for you, try creating a weekly on. 

And, if you are already budgeting on a weekly basis, let us know how that has helped and what you’ve found challenging about it in the comment section below. 

Happy Planning!

Image credits: Top by Pixabay via Pexels.

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Do You Need a Bank Account for Your Proprietorship?

By
Irene Makanga
-
0
Wealth Architects Do You Need a Bank Account for Your Proprietorship
Wealth Architects Do You Need a Bank Account for Your Proprietorship

Sole proprietors don’t always need to have a dedicated business bank account. However, sooner or later they will need one to account for their business. A sole proprietorship is a business owned by one person where there is no legal separation between the owner and the business. As such, the owner can run business transactions through his/her account. 

Here is why it’s a good idea to open a business account for your sole proprietorship:

Easily Track Income & Expenses

When you are just starting, it isn’t necessary to run all your transactions through a separate account. However, as your business grows and the number of transactions exceeds the number of personal transactions, it may be time to open a dedicated business account for your business.

With a separate business account, it will be easier for you to manage and track your business transactions, from collecting revenue and writing cheques for expenses. Ultimately, a separate account for your business transactions will keep your record clean.

Boost Business Image & Professionalism

If establishing a good business image matters to you by providing you with a certain level of clout, then setting up a dedicated business account would be the right way to go for the get-go. 

With a bank account, your business name will appear on cheques and other payment methods. This gives your customers a sense of business stability, strength and confidence in you without much effort. 

Protect Proprietor’s Identity

Since your business is now growing and the number of transactions is also increasing, to reduce chances of a potential fraud or identity theft, trading with a dedicated business account will limit the damage to that account alone or the business trade name.

Learn More: 6 Keys to Successfully Manage Your Personal Finance 

Build A Business Banking Relationship

Your business is growing and having a business relationship with your bank will become increasingly important to propel your business to the next level. For instance, a business account will make it easier to handle sales, payroll and taxes. 

Additionally, a business banking relationship will set you up for credit purposes. With an active business account, obtaining bank financing to purchase or expand your business will be much easier. This also extends to acquiring business credit cards for employees to facilitate ease of doing business. 

Learn More: 10 Reasons Why You Need To Have Multiple Financial Accounts

Key Takeaways

A separate business account will help you boost your credibility as a sole proprietorship and protect your identity as well. Keeping this separate will also help you keep track of your income/expenses and build a great relationship with your bank. Overall, having a business bank account as a sole

A separate business account will help you boost your credibility as a sole proprietorship and protect your identity as well. Keeping this separate will also help you keep track of your income/expenses and build a great relationship with your bank. Overall, having a business bank account as a sole proprietorship is a big win for any proprietor.

If you liked this post, share it on Facebook, Twitter, Linkedin or any other social platform.

Image credits: Top by nappy from Pexels

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5 Big Dangers of Credit Cards and How to Avoid Them

By
Irene Makanga
-
0
Wealth architects - 5 Big Dangers of Credit Cards and How to Avoid Them
Wealth architects - 5 Big Dangers of Credit Cards and How to Avoid Them

Credit cards are great tools if utilized well. They provide numerous perks, allowing you to earn cashback or rewards for purchases and even serve as tools to build credit – which can be important if you want to buy a house or car. However, some risks come with credit cards, and if you are doing so for the first time, be aware of these dangers and how to avoid them while using your credit card wisely – taking advantage of perks, benefits and rewards. 

Here are some of the dangers of using credit cards and how to avoid these problems.

Risk of Overspending 

Owning a credit card requires a lot of discipline. If you lack self-control in the area of spending, easy access to credit will stimulate your desire to buy and consume more. You will be easily swayed by the exciting rewards points, discounts and cashback offered, which will lead you to spend unnecessarily, thereby increasing your indebtedness. 

Avoid the risk of overspending by maintaining a stick financial discipline. Check your outstanding balance often and keep track of all our spending. A great way to avoid unnecessary spending, leave your credit card at home when going out and use other means of payment such as cash, M-Pesa or debit card. 

Missed Payments

Missing payments can harm your credit score and attract late fee charges. Remember that your payment history is one of the main factors contributing to your credit card score. Therefore, missing a payment can hurt your credit history for up to seven years. You don’t want lenders using your bad history to charge you higher interest or leery of loaning you any money. 

Hence, maintain a positive financial outlook by setting up automatic payments met your credit card obligations. This way, you won’t have to worry about forgetting to make payments. Just ensure you have enough in your account for the automatic payment to be carried out. If this isn’t for you, then set up text or email reminders for then your monthly bill is almost due to make sure you pay on time. 

Learn More: How To Build A Good Credit Score

Heavy Interest Charges

Carrying a balance on your credit card means that interest payments increase the amount of time it takes to fully pay off your balance. Interest payments on credit cards are quite heavy and can grow too quickly to keep up with. Therefore, don’t make the mistake of only making the minimum required payment each month. Doing so, you’ll end up paying for interest, as the minimum payments will have little impact on your balance which continues to grow month on month. 

Avoid it by simply paying your balance in full each month  or the stipulated interest free days to avoid paying heavy interest. 

Maintaining  High Utilization Ratio

Credit card utilization ratio refers to the amount of your credit limit you are using and is used as an indicator of lending risk. Creditors believe that when you reach your limit or exceed it, you will have trouble repaying the money. Therefore, maintaining a low utilization ratio makes you seem like less of a risk to the lender. Also, remember that your credit score can be negatively affected by maintaining a high credit card utilization ratio. 

To avoid this, keep a low credit utilization under 30% of your limit. Other alternatives include limiting your spending by budgeting or paying off credit card debt to reduce your credit utilization ratio. 

Susceptibility to Fraud

Owning a credit card makes you more susceptible to fraud. Fraudsters typically initiate fraud by duplicating cards at ATMs, point of sale (POS) or by accessing your details through email or over the phone. Ultimately, they may steal your identity by using your details to avail a new card in your name. I mean this is Kenya. Anything is possible. 

To avoid falling prey to such, stay vigilant and monitor any transactions. Never share sensitive information with others, especially over the phone.  Always have your card swiped in front of you. Also, get your credit report regularly to detect theft early.  If you suspect anything, inform your bank as soon as possible on losing your card or detect suspicious transactions. 

Learn More: All You Need to Know About Credit Card Interest Rates

Bottom Line

There are a lot of risks and dangers associated with owning credit cards, which can be minimized by following the above basic principles. However, the best way to deal with these dangers is to avoid complacency and maintain a simple sense of discipline when it comes to utilizing credit cards. 

Image credits: Top by Pixabay via Pexels.

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How to Start Investing With Little Money

By
Irene Makanga
-
0
How to Gain Financial Freedom and Retire Early
wealth architects kenya - How to Gain Financial Freedom and Retire Early

Financial freedom means that you will never have to work for money if you don’t want to and achieving this is what many of us strive for. So what is your vision for early retirement? Travel the world, spend your days at the beach, spend with family or simply pursue your passion.

In order to gain financial independence and retire early, you will need at least 25 times your annual expenses invested, about 300 times your monthly expenses. This estimated amount invested is important because it allows you to withdraw 4% of your assets without running out of money before the end of a typical 30-year retirement.

Therefore, if your goal is to achieve financial independence and retire early, you will need money to last you more than 30 years, if you retire before your 50s. You will be required to have over 33.3 times your annual expenses invested and withdraw at a lower rate of 3% to reach financial freedom and extend your retirement years.

Steps to Take To Achieve Financial Freedom

Take note that financial independence doesn’t necessarily mean you completely stop working and retire. It means that you don’t have to work for money for a given extended period of time. Many people, therefore, continue to build businesses, change careers after they have achieved financial freedom. This makes financial freedom permission to pursue your passion.

Cut Back On Expenses

Cutting back on your expenses can help you reach financial independence sooner. By simply cutting Kes. 1,000 a month of your expenses, for instance, lowers the amount you will need to reach financial freedom by KES. 300,000. What if you cut your monthly expenses by Kes. 10,000, that will decrease your financial independence number by Kes. 3,000,000. Take leaps, numbers don’t lie. 

These small changes to your expenses will have you have more to invest each month and speed up the accumulation of investments needed to generate the income you will need to be financially independent. 

A word of caution, don’t go overboard with the cutbacks and live a miserable life. Only cut as much as it makes sense to you by simply cutting back on things you don’t value.  Ensure that you keep expenses that make your life richer and fuller. 

Learn More: 6 Big Risks to Your Financial Success

Increase Your Income

While it may be easy to cut back on expenses, there is a better way to achieve financial freedom faster and that’s by increasing how much you earn. You can start a business or take on a side hustle that generates income. A general rule of thumb is to have at least 7 income streams for added extra security. This rule has become even more important during this time of the pandemic as our finances are really put to the test.

With more income streams in place, you’ll be surprised at how much more you can achieve. 

Invest

Investing for retirement is a big part of your retirement plan.  It determines how much you save now and how much you’ll have access to upon retirement. The rate at which you invest is what connects the two – be it 4% or 10% per annum. All in all, the more money you put towards your financial freedom, the sooner it is you can achieve that goal.

Let’s break this down a little with a 30-year retirement time frame below:

Amount Invested4% annual return 10% annual return Difference
500/mo416,1291,130,243714,114
1,500/mo1,248,3873,390,7312,142,344
2,500/mo2,080, 6465,651, 2193,570,573
5,000/mo4,161,29311,302,4397,141,146
10,000/mo8,322,58622,604,87914,282,293
Assuming a 4% and 10% annual return over a 30 – Year Time Frame.

Learn More: How to Calculate Your Financial Independence Number

Take Action

If this is your vision, then take action today. You don’t need to make major changes to your life right now. Start by making small changes over time that are sustainable and likely to propel you into financial independence, with better long-term results. Track your net-worth, income and expenses, so that you can get an idea of what changes to make along the way to progress towards financial independence. You will be surprised to see how quickly you can grow and eventually, perhaps even retire early –  if that’s what you want.

Happy Investing! 

Image credits: Top by bongkarn thanyakij from Pexels

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Should You Save With A Money Market or Savings Account?

By
Irene Makanga
-
0
wealth architects kenya - Should You Save With A Money Market or Savings Account
wealth architects kenya - Should You Save With A Money Market or Savings Account

A savings account is detrimental to your financial health as it keeps your money safe and grows your savings according to a set of interest rates. However, there is also a money market fund, which earns a more favourable interest rate than most savings accounts. 

In this simple guide we breakdown the differences between a money market fund and a savings account, and also provide some tips/special considerations on which one you should choose.

What Is the Difference Between A Money Market Fund & Savings Account?

A savings account is a bank account that earns interest on your balance to boost your savings. The interest rate is set by the bank and sometimes may vary with balances i.e. higher rates with higher balances. The best savings accounts are those that have a high-interest rate, low fees and fewer restrictions on transactions i.e. transfers and withdrawals. 

On the other hand, we have the money market fund, earns more interest as the funds are invested in financially reliable securities that have an average maturity of fewer than 120 days. They include government-issued securities and other debt instruments that are regarded as low risk. 

Learn More:

The key differences of the money market fund and savings fund are as follows:

Accessibility

A money market fund is less accessible than a savings account. The process to withdraw money tends to take a little longer than that of a bank account.

You can withdraw your money from your savings account instantly at the bank’s cashier with a withdrawal form. As for money market accounts, you need to send out a request a few days before you actually need the money. 

Returns

The returns offered by money market funds tend to be higher than savings accounts. Usually, savings accounts offer returns between 1-5% while money market funds offer a varied interest rate of about 6%-13%. 

Fees

The main problem with these accounts is the fees they attract. 

A savings account attracts withdrawal fees to limit such transactions and high minimums balance to keep the account open. There are some banks that limit access to the account by asking you to forfeit interest of the month when you withdraw. 

With money market accounts, there may be balance requirements too and transaction fees too. Additionally, money fund funds also attract management fees, typically about 2-2.5%.

Taxes

With money market funds, interest income can be taxed. This typically depends on what sort of securities the fund invests in. Therefore, while you decide to invest, choose a fund that meets your tax needs. 

Learn More: Is the Bank A Place to Save Money?

Special Considerations

  1. If you are tempted to withdraw your funds all the time, then choose to invest in a money market fund as they typically are a little more difficult to liquidate as compared to savings accounts.
  2. If you have a hard time habitually saving, try using a savings account. You can link your savings account to your regular transactional account to automate savings and make it regular. 
  3. Save where interest earned exceeds the current inflation rate, to preserve your initial capital. 
  4. Take into account tax on interest income, withheld by the bank or not. 
  5. Opt for where interest is compounded either daily, monthly, quarterly or half-yearly. The more often, the better. 
  6. Consider the ease of access in the event of an emergency. 
  7. Take note of the withdrawal costs of the account and any penalties attached to it. 

It is important to note that there are some banks that have money market funds, in which case you can easily automate your savings from your account directly to money market fund. 

Learn More: 8 Easy Ways to Invest With Little Money

All in All

If you aren’t already saving and investing your savings, start small and start today. All in all, your first investment into financial security needs to start somewhere and at some time. Why not today?

Happy Saving!

Image credits: Top by Joslyn Pickens from Pexels

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